Daily Agenda: Investors Gauge Political Risks

Trump gets bump in the polls; Bayer’s Monsanto bid is official; Japanese exports contract; fertilizer deal dies on inveresion concerns.


In an uneventful weekend for macroeconomic data, investors focused on political trends in recent days with shifts in both the U.S. and Europe that could portend major changes down the road. In a special vote on Sunday, the Greek parliament embraced further austerity measures in order to clear the way for an additional $12 billion in fresh credit to potentially diffuse renewed concerns about the European Union’s weakest link. Meanwhile in the U.S., a presidential race appears to be shaping up that leaves many policy and economic questions unanswered. While the election is still six months out, the most recent polls suggest that Republican’s presumptive nominee Donald Trump was inching closer to probable Democratic nominee Hillary Clinton. A Washington Post and ABC News poll even shows that the real-estate magnate holds a narrow lead among likely voters. As G-7 leaders descend on Tokyo today to prepare for tomorrow’s meetings, national politics rather than monetary policy is in the foreground of market narratives.

Bayer play for Monsanto confirmed. Earlier today German pharmaceutical and chemical giant Bayer confirmed that earlier this month it made an acquisition offer to the board of Monsanto that totals over $62 billion. Bayer shares have slumped since the news as investors fret that the purchase price may be overly rich.

Japanese exports contract. April trade data released today by the Ministry of Finance revealed that a rising yen took a big toll on Japanese exports with total shipments abroad declining by 10.1 percent versus the same month last year. Meanwhile, imports declined by more than 23 percent year-over-year creating a multiyear high surplus of 824 billion ($7.53 billion) yen. Economists note that the data suggests that a quarterly gross-domestic-product contraction is now more likely.

Inversion unravels. U.S.-based CF Industries Holdings today announced that it was forgoing its announced acquisition of Dutch fertilizer manufacturer OCI after new regulations put into effect make it more difficult for U.S. companies to optimize taxation by acquiring offshore rivals. With the deal, valued at more than $5.4 billion, now undone, CF Industries will be required to pay a breakup fee of $150 million. Had the merger been consummated the resulting firm would have been the largest publicly traded global producer of nitrogen-based fertilizers.